Trademark Law | Expert Legal Commentary

July 13, 2007

ITC Ltd. v. Punchgini, Inc

ITC Ltd. v. Punchgini, Inc

According to the Second Circuit’s recent ruling in ITC Ltd. v. Punchgini, Inc., No. 05-0933-cv, 2007 WL 914742 (2d Cir. March 28, 2007), there is no federal “famous marks” exception to the basic territoriality rule that the United States does not enforce trademark rights that exist only under foreign law.

According to the Second Circuit’s recent ruling in ITC Ltd. v. Punchgini, Inc., No. 05-0933-cv, 2007 WL 914742 (2d Cir. March 28, 2007), there is no federal “famous marks” exception to the basic territoriality rule that the United States does not enforce trademark rights that exist only under foreign law. The Ninth Circuit, however, has at least recognized – though not applied – the doctrine. (Grupo Gigante SA de CV v. Dallo & Co., 391 F.3d 1088 (9th Cir. 2004)). The big question now is who will get to the issue first, the Supreme Court or Congress.

The “famous mark” doctrine says that a mark registered only under foreign law might still have priority in the United States if it has achieved a certain level of fame. The doctrine has been acknowledged in a handful of state court cases, a few district court opinions and a few TTAB rulings, with little explication of the nuances of how the doctrine might be applied. The Ninth Circuit was the first federal appellate court to hold that there is a famous mark exception to the territoriality principle.

In ITC, the Second Circuit declined to follow the Ninth Circuit and the smattering of case law recognizing the doctrine. The ITC court held that none of those earlier cases showed the doctrine derived from any provision of the Lanham Act or any federal law. The state court and TTAB decisions relied on state or common law. The Gigante court based its decision on policy considerations:

An absolute territoriality rule without a famous-mark exception would promote consumer confusion and fraud. Commerce crosses borders. In this nation of immigrants, so do people. Trademark is, at its core, about protecting against consumer confusion and ‘palming off.’ There can be no justification for using trademark law to fool immigrants into thinking that they are buying from the store they liked back home (citing Grupo Gigante case, 391 F.3d at 1094).

The Second Circuit agreed there was a “persuasive policy argument’ in favor of accepting the famous marks doctrine, but that policy “is not a sufficient ground for its judicial recognition, particularly in an area regulated by statute.” ITC, 2007 WL 914742 at *21. Because there was no mention of the doctrine anywhere in the Lanham Act or other federal law, the Second Circuit was constrained to hold that no such exception to the territoriality rule exists.

The famous mark issue only came up in this case because the court held the plaintiff had abandoned the mark it had previously registered in the United States. Plaintiff is the owner of the well-known Bukhara restaurant in New Delhi. The Bukhara mark at one time was registered in the United States and there were, in fact, a few Bukhara restaurants here.

By the time of this litigation, however, all of the American Bukhara restaurants had been long closed (though others around the world remain open) and the registration had lapsed. Plaintiff intermittently attempted to stop defendants – former employees who opened a similarly named and styled restaurant in New York – from using the mark, but went for long stretches without communicating with defendants or their lawyers and without following up on initial threats to enforce the alleged rights under the mark. As such, the court held plaintiff had abandoned its United States mark. The only apparent avenue for recourse, then, was for the famous marks doctrine to apply.

That doctrine might still prove viable, however, and provide a basis for plaintiff’s relief. The Second Circuit’s holding was limited to federal law, but the complaint also alleged state law claims which the court declined to address at this point. Instead, the court reserved judgment and certified questions to the New York Court of Appeals to determine the viability of the famous marks doctrine under New York law. In particular, the New York court will have to address whether the oft-cited case, Vaudable v. Montmartre, Inc., 193 N.Y.S.2d 332 (N.Y. Supp. Ct. 1959), which seems to stand for the proposition that the famous marks doctrine permits those who use famous enough marks in other countries to gain exclusive rights to the marks here, is still good law and governs this case.

In the age of globalization, the ITC decision might seem anachronistic. As the Ninth Circuit pointed out, commerce does cross borders. There may be something almost quaint about insisting that a mark, no matter how famous, must be registered in the United States to be entitled to any protection, when those same marks are instantly recognizable around the world thanks to exposure on the internet and CNN, among others.

Perhaps the court’s strict reading of and reliance on federal statute as the basis for its holding was its way of sending a message to Congress that trademark law must adapt to the new realities of the multinational age. On the other hand, it could be read as admonishing those multinational companies that if they expect to benefit from United States law, they must fulfill their obligation to submit to it first.

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